Have you thought about this question? What is what we traders have to do, what is what best describes our job? Understanding the answer to this question will help you achieve your trading goals a Forex trader.
So before you continue reading this article, I want you to think for a few minutes about this, what is what you think is our job as traders? Or better yet, what do you think is our main goal as traders?
Told you a few minutes… not a few seconds :)
Might seem simple at first sight right? But it isn’t… it wasn’t for me anyway, I spent years trying to figure this out, trying to think what is what best describes our job as traders. Here are a few of “objectives” I thought on my early days as a trader:
To make X amount of pips each month – Nope, this isn’t our main objective. This one comes as a result of achieving or main goal.
To manage our risk – Well… you have to manage your risk if you want to survive on the trading arena.
To use capital management on each trade – Again, we have to… this is what will keep us alive and trading in case we run into drawdown, and it also helps us have a geometric growth on our capital through a winning streak… It’s important, but is far from our main objective.
To have a streak of at least 20 positive trades – Nope… we are never in control over the market, we don’t know what is going to happen next. If I was able to know ahead of time that my next trade was going to hit my take profit order (you see, just my next trade, imagine if I knew what is going to happen on the next 20) I’d risk my whole account on it… but it is just impossible.
To make X% of return per month – As the first one, it comes as a result of achieving our main goal.
To be psychologically ready to trade – Ahhh, this one is important, we need to understand our emotions in order to trade successfully, but again, if you are able to achieve your main goal, you will not have problems with this one.
So, none of these “objectives” accurately describes our job as traders or our main objective, I think it’s much simpler than that. Our job as traders is and main goal is:
To follow our trading plan
Simple enough? Yes, it implicates plenty of hard work though… First, in order to follow your trading plan, you need to have one!!! So, if you don’t have a trading plan, this would be a good time to start writing one.
Now, see the questions above? You’ll need to address all of them (and more) on your trading plan:
How to determine which currency pairs to trade? This is not the entry signal; you need to address the conditions that need to be met in order to start looking for trade opportunities.
How to enter the market? This one is your entry signal, the indicator has to do this, or that, etc, price action, or a combination of them, etc.
How to exit the market? On both, when the market goes against you, and when the market moves on your favor?
How to handle each trade? This is known as trade management, are you going to add to your position, take partial profits or losses, and the conditions that have to be met in order to act.
Risk management? The methodology you are going to us to set your stop losses, are you going to trail your stop, etc.
How much to risk on each trade? Yep, this is capital management. i.e. I’m going to risk 1% of my account on each trade.
How to deal with fundamental announcements… are you going to leave your trades open during important announcements?
Weekends… are you going to close your trades before the market closes on Friday?
These are a few of the questions that you need to address in to create your trading plan. There are more but with the ones above you are going to have a nice start.
So please, create your trading plan, you need to know where you are going, all your trading actions need to target your main goal: follow your plan, only then, you’ll know you are doing things right.
One more thing, it doesn’t matter what happens as long as you are following your trading plan, if doesn’t matter if the market goes against you, the only thing that matters is that you are following your trading plan, it’s the only way to achieve consistent results.
Feel free to comment, you don’t have to agree with me in order to leave a comment. And don’t forget to like it if you found this article useful.